The prospects for Apple, Google and Microsoft in 2014

Reuters - A Google trademark is reflected in Apple logo in this photo illustration taken in Berlin, August 31, 2012. REUTERS/Pawel Kopczynski

Although change is inevitable in any business, nowhere is it more obvious than the tech space, where fickle consumer tastes and seismic shifts in platform choices can quickly turn longtime industry leaders into also-rans. As 2014 dawns, three of the longest serving pacesetters in the space find themselves at pivotal turning points in their respective histories. How they choose to navigate the year to come will ultimately determine whether they can still set the tone in future.

Almost four years after its last major category-buster, the iPad, was introduced, investors are becoming increasingly concerned that it’s been milking its existing franchises for too long. In fairness, Apple’s fundamental metrics remained the envy of the industry, with year-over-year revenues rocketing up 27 per cent in its latest quarter to a record $35.966 billion on the strength of 57.6 per cent and 26.2 per cent annual growth in iPhone and iPad sales, respectively.

But cracks in the armour began to appear as Google’s Android universe ate into Apple’s market share and as overall growth in its maturing product lines showed early signs of flattening. This is the year that Apple needs to pull something fresh out of its R&D hat to reignite growth and reassert its image as the industry’s Pied Piper. The updated and renamed iPad Air suggests Apple is making room in its product line for a larger, more productivity-focused iPad Pro in 2014, but a laptop-like tablet won’t be enough to placate concerns the company is resting on its laurels.

Coming off a solid year of growth where its share value steadily rose from $700 to over $1,100 amid strong penetration of its Android operating system in global smartphone and, increasingly, tablet sales, Google has no intention of easing off the gas in 2014.

While critics chide the company for losing its focus, its leadership is preparing for the day when advertising is no longer the inviolable growth driver it is today. It currently accounts for 85 per cent of Google’s revenue, but weakness in the all-critical cost-per-click metric in 2013 – it slipped 8 per cent last quarter compared to the year-ago period – suggests the advertising rocket ride isn’t indefinite. Throughout 2014, expect Google to push more of its pet products into the mainstream as it looks for new sources of revenue and growth.

The company that kickstarted the PC revolution now has the most to lose as traditional desktops and laptops give way to mobile devices. While Microsoft’s performance in 2013 was fiscally strong – its shares climbed from $26 to a six-year-high of $37, revenue climbed 16 per cent year-over-year and income was up 17 per cent thanks to strong Office and server software sales – growing weakness in its flagship Windows franchise and concerns over what happens after CEO Steve Ballmer vacates the corner office are clouding Microsoft’s longer-term prospects.

Windows 8 takeup fell below expectations, with consumers and businesses shying away from the radically different dual-interface product in favour of the older, traditional Windows 7 desktop. The Windows 8.1 update addresses most customer complaints – including reinstatement of the Start button – but the company’s biggest challenges remain ahead of it as it fights to keep itself relevant amid the market’s accelerating shift toward mobility. Its once-iron-clad partnership with Intel, the other half of the Wintel dynasty, is unravelling as the chipmaker looks for salvation in chipsets exclusively designed for Android.

Consistent growth in Windows Phone shipments – it is now the world’s third-largest mobile platform – as it solidifies its takeover of Nokia’s handset business will give Microsoft a beachhead with developers, consumers and corporate decision-makers in 2014. But weak sales of its Surface tablet hardware after a disastrous $900 million writedown in 2013 could subvert the company’s dreams of mobile competitiveness.

No matter who the player is, 2014 is already shaping up to be a year of uncertain prospects amid escalating rates of change.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca

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